India petrochemical demand crumbles amid second COVID-19 wave

Author: Felicia Loo

2021/04/28

SINGAPORE (ICIS)--Facing possibly its worst humanitarian disaster, coronavirus-ravaged India is racing against time to contain a second wave of deadly infections, with effects rippling through its petrochemical industry.

The recent spread of a new variant has walloped the country, whose daily infections have hit more than 300,000 in the second half of April.

Manufacturing, textile, consumer durables, automobile, travel, and hospitality sectors are again facing disruptions as more states impose stringent curbs on public movement and transport to combat the pandemic, a full year since a crippling nationwide lockdown was imposed.

"The rising death rate and anecdotal evidence of hospital infrastructure getting severely burdened, suggests that the current status quo on lockdown stringency, may be compromised in coming weeks," Japan’s Nomura Global Markets Research said in a note dated 19 April.

"For example, the state of Delhi and some cities in Uttar Pradesh have followed Maharashtra in imposing a complete lockdown (albeit for a week)," it said.

"Most of the other major states have stuck to night curfews or weekend lockdowns, but may be compelled to impose stricter restrictions, if their hospital capacity runs out. This suggests that the economic impact of the second wave may very well intensify in coming weeks," Nomura said.

As of 27 April, India has the second highest number of confirmed COVID-19 cases in the world at more than 17m, with recorded deaths at above 198,000, data from the World Health Organization (WHO) showed.

SOME PRODUCERS BOOST EXPORTS AMID WEAK DOMESTIC DEMAND
India is a major importer of most petrochemicals, but a pronounced weakness in domestic demand amid surging COVID-19 infections has prompted local producers of some products to look for markets abroad for their output.

In the polyolefins market, some Indian producers are likely to export more cargoes to China given the weakened state of domestic demand.

An Indian producer had offered polyethylene (PE) and polypropylene (PP) to China for June shipment last week but the shipment may be subject to delays.

For PP, the south Asian country’s imports in the second quarter may not be as strong as the first as states across the country have imposed varying degrees of lockdowns amid the unabated spike in coronavirus cases.

In the purified terephthalic acid (PTA) market, spot cargoes from northeast Asia have been delayed, and could affect suppliers in Taiwan and China, as Indian polyester facilities have reduced production.

India had a 35% share to China’s total PTA exports in the first quarter of the year, and a 30% share in Taiwan’s PTA exports in January-February 2021, according to ICIS Supply & Demand database.

In the downstream polyester market, demand has remained weak, with local plants running at around 60-70% of capacity during the week ended 23 April, down from an average of 90% in end March.

India is a net importer of PTA, but weak domestic demand has been prompting some local producers to export some volumes to Europe to prevent a massive build-up in inventory.

PTA supply in the local market is expected to lengthen in the near term as previously booked import cargoes start arriving and amid dwindling run rates at downstream polyester units.

In the monoethylene glycol (MEG) market, India has shipped out a huge volume of around 10,000 tonnes of cargoes to China, a reversal of its usual role as an importer of the material.

Demand is also softening for polyvinyl chloride (PVC) and acrylonitrile-butadiene-styrene (ABS).

In the 2-ethylhexanol (2-EH) market, trade appears to be on a standstill at this juncture.

“There are some indications for deep-sea cargoes, but India is in [a] wait-and-watch mode because of the COVID-19 situation,” said a buyer. “It is pretty quiet due to the lockdown.”

2-EH is used to make plasticizers, mainly dioctyl phthalate (DOP), with key end-markets in the construction, appliance and automotive industries.

For linear alkylbenzene (LAB), however, domestic demand has been getting stronger due to its end-use in biodegradable detergents and other cleaners amid the second COVID-19 wave.

“Prices are now secondary, what matters most is availability,” said a northeast Asian supplier.

For oleochemicals, demand in India is expected to be remain stable as major home care manufacturers are likely to continue running.

“India is not in a good situation and the next two weeks are critical," a regional producer said.

"As of now there are 3m vaccinations being given on a daily basis. All the major home care manufacturers remain unaffected as of now as these factories are considered essential," the producer added.

There may be an impact on palm oil consumption and demand if India shuts down, and technically there may be an impact on the derivatives such as fatty acids, fatty alcohols and glycerine, another regional producer said.

Oleochemical products such as fatty acids, fatty alcohols, glycerine and soap noodles have a wide range of applications including in food, pharmaceutical and personal home care products such as soaps, detergents and shampoos.

For mixed xylenes (MX), weak demand and limited cargo drawdown have caused a build-up of inventory at Indian ports.

Importers have had to delay loading timings, causing some tank ullage issues in Thailand, which is a major main supplier of MX to India.

Some of southeast Asian spot cargoes were sold to alternative destinations like China.

Analysis by Felicia Loo

Additional reporting by Lucy Shuai, Samuel Wong, Jonathan Chou, Helen Yan, Nurluqman Suratman, Yuanlin Koh, Judith Wang, Keven Zhang, Jude Chan, Jackie Wong, Julia Tan and Veena Pathare

Photo: India's Punjab state orders closure of shops by 5PM, Amritsar, India - 27 April 2021. (By Sameer Sehgal/Hindustan Times/Shutterstock)

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